ConocoPhillips (NYSE: COP) today announced the sanction of development
of a second 4.5 million tonnes per annum (MTPA) production train for its
Australia Pacific LNG coal seam gas (CSG) to liquefied natural gas (LNG)
project in Queensland, Australia.
“This announcement marks another important milestone for the Australia
Pacific LNG project and ConocoPhillips,” said Ryan Lance, chairman and
chief executive officer. “Sanctioning of the second train is the final
step in the approval process for the project. From this point we are
committed to the development and construction of all infrastructure and
facilities to ensure the first delivery of LNG in 2015.”
LNG exports from the second train are scheduled to commence in early
2016 under binding sales agreements to Sinopec Corp. and Kansai Electric
Power Company (Kansai Electric).
“The Australia Pacific LNG project is on schedule, and is strategically
positioned to commercialize its superior CSG reserve position and
satisfy Asia’s rapidly growing demand for reliable, cleaner-burning
energy,” Lance said. “The approval of Sinopec Corp.’s additional
subscription is testament to the strong growth market in China and the
importance of Sinopec Corp. as a key partner. We look forward to further
developing our relationship over the next 20 years.”
Sanction of the second LNG train includes the further development of
related upstream gas gathering and processing infrastructure as well as
the construction of the second production train by Bechtel.
As previously announced, the estimated gross capital cost associated
with the second train is US$6 billion, with a total two train project
cost of US$20 billion. The majority of the scope will be executed under
pre-agreed options to extend existing contracts related to the first LNG
train, including the Bechtel International, Inc. and Bechtel Australia
Proprietary Limited contract for facilities on Curtis Island.
Following the start up of the second train, the project has an
anticipated peak production net to ConocoPhillips of 100,000-105,000
barrels of oil equivalent (BOE) per day. This long-term project has
returns that are competitive with other LNG projects and will provide
long-term production and cash flow to ConocoPhillips’ portfolio,
contributing to the company’s plans to deliver 3 to 5 percent annual
production growth and 3 to 5 percent annual margin improvement.
In April 2011, Australia Pacific LNG and Sinopec Corp. signed a sales
agreement for 4.3 MTPA of LNG for 20 years from mid-2015 and a
Subscription Agreement in which Sinopec Corp. subscribed for a 15
percent equity interest in Australia Pacific LNG. The first train of the
project was sanctioned in July 2011, followed by the signing of a
binding agreement with Kansai Electric in November 2011 for the sale and
purchase of approximately 1 MTPA of LNG for 20 years from 2016. An
amendment of the existing sales agreement with Sinopec Corp. was signed
in January 2012 increasing their LNG purchase to 7.6 MTPA.
With sanction of the second train, the agreement for Sinopec Corp. to
subscribe to an increased equity interest in the Australia Pacific LNG
joint venture is now unconditional with completion due to occur shortly.
Sinopec Corp.’s ownership interest will increase from 15 percent to 25
percent, with ConocoPhillips’ and Origin Energy’s ownership interest
each being reduced from 42.5 percent to 37.5 percent. Sinopec Corp.’s
additional equity subscription provides Australia Pacific LNG with a net
payment of US$1.4 billion for value determined as at Jan. 1, 2011. That
amount is then adjusted for Sinopec Corp.’s ownership interest share of
capital expenditure since that date. Therefore, Sinopec Corp. will
inject an estimated US$2.1 billion into Australia Pacific LNG. These
funds will be used to meet project expenditure before any additional
funding is required from ConocoPhillips, Origin Energy or Sinopec Corp.
Origin Energy and ConocoPhillips previously agreed, subject to certain
milestones, that final investment decision payments on the first two
trains of the project will be deferred until ConocoPhillips achieves an
agreed cash rate of return on its project investment, including
acquisition cost. In accordance with that agreement, this project
sanction defers ConocoPhillips' final investment decision payment of
US$500 million for the second train of the project.
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About ConocoPhillips
Headquartered in Houston, Texas, ConocoPhillips has operations in 29
countries and more than 16,000 employees as of May 1, 2012. Production
averaged 1.62 million BOE per day in 2011 and proved reserves were 8.4
billion BOE as of Dec. 31, 2011. For more information, go to www.conocophillips.com.
CAUTIONARY
STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release contains forward-looking statements.
Forward-looking statements relate to future events and anticipated
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be no assurance that such expectation or belief will result or be
achieved. The actual results of operations can and will be affected by a
variety of risks and other matters including, but not limited to,
changes in commodity prices; changes in expected levels of oil and gas
reserves or production; operating hazards, drilling risks, unsuccessful
exploratory activities; difficulties in developing new products and
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existing or future environmental regulations; potential liability
resulting from pending or future litigation; limited access to capital
or significantly higher cost of capital related to illiquidity or
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general domestic and international economic and political conditions; as
well as changes in tax, environmental and other laws applicable to our
business. Other factors that could cause actual results to differ
materially from those described in the forward-looking statements
include other economic, business, competitive and/or regulatory factors
affecting our business generally as set forth in our filings with the
Securities and Exchange Commission. Unless legally required,
ConocoPhillips undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Note on estimated gross capital cost – Total two train project cost
of US$20 billion excludes any movements in foreign exchange rates.
